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When a couple commits to a life together, merging your money is often the biggest hurdle to achieving marital bliss. It’s easy to see why: combining debts and assets can be complicated and messy, and it’s not uncommon for one spouse to have a vastly different financial philosophy from the other (especially if one is a saver and the other is a spender).
But what does it mean to merge your money? It can be as simple as working out who pays which bill, or as in-depth as merging your debts and assets and opening a joint account for couples. Neither approach is superior to the other, and the approach that’s best for you depends on your family’s needs.
For most couples in Canada, combining finances means at minimum opening a joint account for daily purchases, according to 76% of couples in a 2016 TD Bank survey. For others, combining finances could be as complex as researching the best joint accounts for married couples, opening joint high-interest savings accounts, using joint credit cards for travel rewards, and even preparing detailed credit card debt payoff plans. Here are some of the best ways for Canadians couples to manage their money.
A Joint Bank Account
The most common way that Canadians share their money is through one or more joint bank accounts. In Canada, you can open accounts that grant each spouse equal access. It's a fairly simple process: with Tangerine, you can even do the whole process online or over the phone. However, consider these pros and cons before saying “I Do” to having a joint account with your spouse.
Benefits of a Joint Account for Couples
There are many benefits to a joint account for couples. Sharing a joint account lets each spouse access money when they need it, without having to clear the purchase through their partner first.
When you open a joint account, each spouse will receive a debit card and chequebook. Both spouses can deposit and withdraw funds, which makes it easy to divide up financial chores like paying bills and buying groceries. Monitoring accounts is also easier since both spouses will also have access to it through a convenient online banking portal.
From a workload perspective, a joint account makes it easy to split financial chores evenly. One spouse may oversee paying bills, while the other reconciles the monthly credit card statement. When both spouses have equal access to their money, it is less likely that a single partner will take on all the financial management tasks.
Legally, a joint account protects both spouses from emergencies. For example, if a family has a series of joint accounts and one partner dies or becomes ill, there won’t be any need to go through the legal system to claim that money, since it is in both their names.
Finally, joint accounts can increase financial accountability. It is more difficult to conceal financial problems if both spouses can see the contents of the joint account.
Our pick for joint chequing accounts is Scotiabank's Preferred Package, which is a rewards chequing account — a unicorn in the banking world. With an easy-to-use online portal, not only does it make banking as a couple a cinch, but you can earn SCENE points or Scotia Rewards® Points. Plus, as a welcome bonus, new customers can earn $300* cash when they open a Preferred Package account by December 30, 2019. Another great feature? This chequing account comes with unlimited debit transactions and Interac e-Transfers — an essential when you're banking as a couple. Learn more about Scotiabank.
Drawbacks of a Joint Bank Account
Managing your money through a joint account simplifies daily financial tasks, but it can also take away a sense of control or autonomy. If a couple chooses to combine their finances completely, a spouse may feel that they have no control over the money they earn, because it all goes into one joint family account.
These feelings are especially common in the first few months of a financial merge. Transitioning from having total autonomy over your money to requiring approval for even small purchases is a huge adjustment. This feeling of lost autonomy is normal and can be remedied by setting aside a monthly allowance that each spouse has singular control over.
Joint accounts can also cause trouble in a relationship, especially if there are already communication problems. Since you’ll need to keep track of the money coming into and going out of joint accounts, consistent and clear communication is key. Otherwise, you may end up overdrawing the accounts, which can cause money arguments.
Finally, problems may also arise when a relationship ends because joint accounts can be messy to separate. Some spouses may even be vindictive – emptying and closing accounts without permission from their soon-to-be ex-spouse. Since joint accounts are shared equally, it can be risky to keep the bulk of your money there if the relationship is ending.
Using Separate Bank Accounts
When done correctly, joint chequing and savings accounts can simplify your financial life, but they can also get very messy if a relationship deteriorates. If this sounds like too much risk for you, keeping your finances separate may be a better approach.
Separate accounts do not mean one spouse is any less accountable than the other. It just means you’ll approach saving and spending a little bit differently.
Most of the time, maintaining separate bank accounts means splitting the monthly bills equally, and saving for financial goals like retirement planning and emergencies separately. You’ll each pay off your debts separately, and big goals like saving for a down payment are done separately and then combined just before you’re ready to make the purchase.
Some couples will choose a hybrid approach with a joint chequing account for shared expenses like rent and groceries, keeping all other spending and saving separately.
Setting Financial Goals as a Couple
Deciding between joint and separate accounts is not an easy decision, and what works for one couple may not work for others. If you’re struggling to decide which approach will work for you, try asking yourself these questions about your financial goals as a couple. The answers to these questions will quickly reveal which strategy you prefer. Here are some questions to answer with your spouse:
- How will we pay off debt? Will you be responsible for paying off your debt, or will the couple work together to pay off all debt?
- How will we save for retirement? Is retirement something you will save for jointly, or does one spouse have an excellent retirement package offered through their employer?
- How will we handle everyday expenses like groceries and rent? Would you prefer that everyday expenses be divvied up between spouses or funnelled through a joint account?
- How will we handle emergencies? Will you maintain your own emergency fund in a high-interest savings account and handle emergencies only affecting you, or will you save for them jointly as a couple?
- How will we save for major goals? Will you each save money for goals separately, or will you open a joint account and contribute as a couple?
Talking through each of these questions with your spouse will help you determine whether a joint account or separate accounts will work for you, or whether a hybrid system is a better approach.
Joint vs. Separate Bank Accounts: How to Choose?
Whether to have joint or separate bank accounts is a big question in a relationship, but keep in mind that you don’t have to choose one or the other. Many couples ultimately choose a combination of joint and separate accounts, and it’s just a matter of preference. Finally, keep in mind that, just like a relationship, your financial needs will evolve. What works for you now may not be feasible in five years, and you can always make changes to your accounts down the road.
Whether you’re choosing joint or separate accounts, take the time to shop around together for a bank that best suits your financial circumstances and goals as a couple. With no fees, competitive interest rates, and an excellent selection of financial products, Tangerine wins out as our top pick for the best online bank in Canada. For those who prefer a brick-and-mortar bank with top-notch customer service, consider signing up for a Scotiabank Preferred Package. With a reasonable monthly fee, points-earning potential, and unlimited transactions included, this chequing account really makes banking super simple. That way, you know you’re on the same financial path – even if you’re walking on separate sidewalks.
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